Wednesday 8th May 2013
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Wall Street climbed to new records, and Germany's DAX too, amid expectations that global central bank support will continue to help underpin corporate profits.
Australia's central bank became the latest to lend a hand as it unexpectedly cut its key interest rate to 2.75 percent, from 3 percent, and said it was ready to do more. Investors are betting that will make equities the most attractive place to put their money for some time ahead.
In afternoon trading in New York, the Dow Jones Industrial Average gained 0.47 percent, as did the Standard & Poor's 500 Index, while the Nasdaq Composite Index eked out a 0.04 percent advance.
The S&P 500 touched a record 1,625.91 earlier in the session, while the Dow touched a high of 15,050.21.
"This is a QE-fuelled market," Steven Bulko, the New York- based chief investment officer of Lombard Odier Investment Management's US$1 billion long/short 1798 Fundamental Strategies Fund, told Bloomberg News.
"You're just not seeing sales based on allocation into any other asset class because of the relative unattractiveness of everything other than equities. That's putting in place a firm bid to the equities market."
Today, the US sold US$32 billion in three-year notes, drawing a yield of 0.354 percent, in line with a forecast of 0.355 percent in a Bloomberg survey of eight of the Federal Reserve's 21 primary dealers.
The bid-to-cover ratio at today's auction was 3.38, compared with an average of 3.57 for the past 10 sales, a sign that interest in fixed-income securities may be waning and in keeping with billionaire Warren Buffett's comments in recent days that bonds were a "terrible" investment now.
The US Treasury plans two more auctions later this week.
In Europe, the benchmark Stoxx 600 Index finished the session with a 0.3 percent increase from the previous close. France's CAC 40 rose 0.4 percent, while the UK's FTSE 100 climbed 0.6 percent.
Germany's DAX added 0.9 percent, bolstered by better-than-expected data from Europe's largest economy. German factory orders, adjusted for seasonal swings and inflation, rose 2.2 percent in March. Economists had predicted a fall of 0.5 percent.
The DAX closed at a record 8,181.78 points. Hendrik Klein, who runs Swiss asset management firm Da Vinci Invest told Reuters he felt the DAX could reach 9,000 points by the end of 2013.
Portugal was the star on European fixed-income markets. It announced its first 10-year debt auction since its 2011 financial rescue. While the country was seeking to raise about 3 billion euros, investors' demand was more than three times that, according to Bloomberg and Reuters.
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